Until recently, the luxury real estate market remained buoyant as the rest of the U.S. housing market crumbled. Now the stock market has crashed, hundreds of thousands of financial jobs are disappearing and Wall St. bonuses are expected to fall by 50%. Barron's predicts the fallout on luxury housing markets like Manhattan and its tony suburbs will cause price declines of 20%-25% over the next five quarters.
Transactions in the $5 million-plus market are generally in cash, and so are unaffected by tighter mortgage standards. Foreclosures, too, are rare. But move-up sellers can’t sell their luxe digs and buyers are waiting for prices to fall further. Foreign buyers who were propping up markets like Manhattan and Florida are now retreating as their own fortunes wane.
Bel Air, Calif., Las Vegas and New York's Westchester County have seen price cuts on 45%, 29% and 28% of all luxury listings, respectively. Inventory and time on the market is skyrocketing while incentives abound. In some markets, luxury homebuilders have noted a 50%+ decline in demand.
Traditionally rich enclaves like Beverly Hills and Greenwich, Conn. have seen less price cuts than in places that were just bid up during the housing boom. But that doesn't leave them immune. Barron's warns New York: "Look out below!"
